With today’s economic downtown, and record setting unemployment figures it is no surprised many Canadians are struggling to meet their bill payments at the month end. Many of us are penalized with bad credit, or slow payment on the credit report, and due to that are not able to finance a vehicle through the normal channels dealers offer. First of all, you are not alone in this situation, there are countless people who are in the same boat. Now if you are currently in a situation like such, you probably have noticed it is difficult for you to get any credit, or finance any loan. But all hope is not lost yet, you can apply for a bad credit car loan that will work in your favor. Because many Canadians need a car for work or family, they found themselves with no where to turn when the big dealerships turn them down for a loan. The fact is you are looking at the wrong resources for your car loan.
The difference between a bad credit car loan and a normal car loan is mainly in the interest rate. A brand new car can cost you in range of 0.9% to 8% when it comes to financing. But a bad credit car loan will range from 12% to 29%. I know the APR seems high, but when you look at the amount of money you are borrowing the cost difference is not as much as you think. For example if you took out a $10000 loan over the period of 24 month, a normal 5.9% interest rate will produce a payment of $442 while a 15% average bad credit car loan will only produce a payment of $484. The extra $42 dollars can mean the world to someone who is in need of a car loan. Not to mention a bad credit car loan can be refinanced with a lower APR or interest rate, if your repayment history is good for the next 12 months. So in essence you can break your higher interest loan and get a lower interest rate within 12 months. That is called “credit rebuilding”, where the bank sees your improvement and offer you a break on the interest rate.
But it is crucial for you not to over apply, this can be two scenarios, one where an individual is submitting credit application to 5 lenders at a time. The banks will see this as “credit hunting” which is a bad sign for getting approved. Don’t make yourself look desperate in the bank’s eyes. Also don’t over apply by applying for a loan amount that is way out of your reach, you should consult a credit specialist to find out the loan amount you will be pre-approved for. So you will not go over your limit, which can mean bad news for you as a client.